2Planning an Internal Audit Objectives of PlanningUse of Internal AuditFactors affecting Planning ProcessScope of PlanningFactors affecting scope of Internal Audit.Planning process
3Objective of PlanningInternal audit plan is a document defining the scope, coverage and resources, including time, required for an internal audit over a defined period.Objectives include:suggest improvements to the functioning of the entity.strengthen the overall governance mechanism of the entity
4Use of Internal AuditUnderstand, assess and evaluate the risks and adequacies of the prevalent internal controls.Identifying areas for systems improvementEnsuring optimum utilization of the resourcesEnsuring proper and timely identification of liabilitiesEnsuring compliance with internal/ external guidelinesSafeguarding the assets of the entityReviewing and ensuring adequacy of information systems security and control.Reviewing and ensuring adequacy, relevance, reliability and timeliness of management information system.
5Factors affecting Planning Process Objectives of the activity and significant risks associated with the same.The risk management and internal control system instituted in the organization.Selection of engagement team.Business/Industry developments.Changes in the financial reporting framework
6Scope of Planning Knowledge of the legal and regulatory framework Knowledge of the entity’s accounting, internal control systems and policiesDetermining the effectiveness of the internal control proceduresDetermining the nature, timing and extent of procedures to be performedIdentifying the activities warranting special focusAllocation of staff to different activities.Setting the time budget for each of the activitiesIdentifying the reporting responsibilities
7Factors affecting scope of Internal Audit Terms of the engagementNature of accounting system and Accounting policies adopted.Nature of information technology system used by the clientAuthorization and delegation of authority in the systems environmentThe nature of management information system in vogue and Expected audit coverageMateriality thresholds established in respect of various areas of auditNature and extent of audit evidence to be obtainedExperience and skills of the staffRequirements of the applicable pronouncements of the ICAI.Statutory or regulatory framework in which the entity operates
8Planning Process Obtaining Knowledge of the Business Establishing the Audit UniverseEstablishing the Objectives of the EngagementEstablishing the Scope of the EngagementDeciding the Resource AllocationPreparation of Audit Programme
10Basic Principles Governing Internal Audit Integrity, Objectivity and IndependenceConfidentialityDue Professional Care , Skills and CompetenceWork performed by Others and DocumentationPlanningEvidenceInternal Control; and Risk Management SystemReporting
11Integrity, Objectivity and Independence Straightforward, honest and sincere in his approach to his professional workMaintain an impartial attitudeImmediately bring any actual or apparent conflict of interest to the attention of the appropriate level of managementConfidentialityMaintain the confidentiality of the information acquired in the course of his work
12Due Professional Care , Skills and Competence Due professional Care to be applied:In Deciding the extent of work required to achieve the objectives of the engagement.In assessment of risk managementControl and governance processes andCost benefit analysis.Obtain skills and competence through general education, technical knowledge through study and formal courses.
13Work Performed by Others Direct, supervise and review the work delegated to assistants.No reasons to believe that he should not have relied on the work of the expertResponsible for forming his opinion on the areas/ processes being subject to internal audit or his findings.DocumentationDocument matters, providing evidence that the audit was carried out in accordance with the Standards on Internal Audit
14Planning Obtain knowledge of the legal and regulatory framework Obtain knowledge of the entity’s accounting and internal control systems.Determining the effectiveness of the internal control procedures.Identifying the activities warranting special focusSetting the time budget for each of the activitiesIdentifying the reporting responsibilitiesBenchmark the actual results of the activities.
15Internal Control and Risk Management Systems Obtain an understanding of the risk management and internal control framework.Perform steps for assessing the adequacy.Review the adequacy.Perform risk-based audits on the basis of risk assessment process.Evidence: obtain appropriate evidence to draw reasonable conclusions.Reporting: Review and assess the conclusions drawn from the evidence obtained and suggest remedial action
17Documentation Reviewer Use of documentation Factors affecting DocumentationMatters to be DocumentedIdentification of Preparer and ReviewerExceptional CircumstancesDocument Retention and Access
18REVIEWER Reviewer means an Individual who has: reasonable knowledge and experience of internal audit processesreasonable knowledge of SIAs, other relevant pronouncements of the Institute.reasonable understanding of the business environment in which the entity operatesreasonable understanding of internal audit issues relevant to the entity’s industry
19Use of DocumentationEnables an experienced internal auditor, having no previous connection with the internal audit to understand:The nature, timing and extent of the audit procedures performed.The results of the audit procedures and the audit evidence obtained.Significant matters arising during the audit and the conclusions reached thereon.Terms and conditions of an internal audit engagement, scope of work, reporting requirements, any other special conditions, affecting the internal audit.
20Factors affecting Documentation The nature and extent of the audit procedures to be performedThe identified risks of material misstatementThe extent of judgment required in performing the work.The significance of the audit evidence obtained.The nature and extent of exceptions identified.The need to document a conclusion or the basis for a conclusion.The audit methodology and tools used.
21Matters to be Documented Engagement letter or the internal audit charterInternal audit plan and programme, Chart of the organizational structure and Progress report, MIS report.Analytical procedures performed and results thereofCopies of significant contracts and agreementsInternal review reportsEvaluation questionnaires, checklists, flowchartsCertification and representations obtained from managementResults of risk and internal control assessments
22Identification of Preparer and Reviewer Who performed that task and the date such work was completed.Who reviewed the task performed and the date and extent of such review.Reasons for creating particular internal audit documentation.Source of the information contained in the internal audit documentation andAny cross referencing to any other internal audit documentationThe preparers and reviewers of the internal audit documentation should also sign the workings.The internal audit file should be assembled within sixty days after the signing of the internal audit report.
23Exceptional Circumstances The details of circumstances encountered along with the documentary evidence.The new or additional audit procedures performed, audit evidence obtained, and conclusions reached andWhen and by whom the resulting changes to the audit documentation were made, and reviewed.
24Document Retention and Access Formulate policies for custody and retention.Ownership of audit documents.Access to Third party.Retention of Documents.
26Reporting Contents of the SIA Introduction Basic Elements of Internal Audit ReportCommunication to ManagementLimitation on ScopeRestriction on Usage and Report Circulation Otherwise Than to the List of Intended Recipients
27Introduction and Basic Elements of an Internal Audit Report To establish standards on the form and content of the internal auditor’s report.Basic Elements of an Audit ReportTitleAddresseeReport Distribution ListPeriod of coverage of the ReportOpening or introductory paragraph, Objectives & scope ParagraphExecutive SummaryObservations, findings and recommendationsComments from the local management and Action Taken ReportDate, Place, Signature with membership number of the Internal Auditor.
28Communication to Management Communication with the management to ensure that the recommendations in the final report are practical.The stages of communication and discussion should be as under :Discussion DraftExit MeetingFormal DraftFinal Report
29Limitation on scope and Restriction on Usage and Report Circulation When there is a limitation on the scope of the work, the report should describe the limitation.Restriction on Usage and Report Circulation Otherwise Than to the List of Intended RecipientsThe Report should contain:It should be used for intended purpose only as agreed upon.The circulation of the Report should be limited to the recipients mentioned in the Report Distribution List.
31Sampling Contents of the SIA Introduction Definitions Use of Sampling in Risk Assessment Procedures and Tests of ControlsDesign of the SampleSample SizeStatistical and Non-Statistical ApproachesSelection of the SampleEvaluation of Sample ResultsDocumentation
32Introduction ,Definition and Use of Sampling To establish standards on the design and selection of an audit sample and provide guidance on the use of audit sampling.The SIA defines the followingAudit SamplingErrorPopulationSampling RiskSampling UnitStatistical SamplingTolerable ErrorUse of sampling in Risk Assessment and tests of controlTo obtain an understanding of the entity, business and its environment, and its internal control.Sampling of tests of controls is appropriate when application of the control leaves audit evidence of performanceRisk can be reduced by increasing sample size for both tests of controls and tests of details.
33Design and size of the sample and Statistical and non Statistical Approaches Design of the sampleThe sample should be designed considering the specific audit objectives, the population from which the auditor wishes to sample, and the sample sizeSample SizeShould be determined considering sampling risk, the tolerable error, and the expected error.Lower the risk, greater the sample size.Statistical and Non-Statistical ApproachesDecision of using either statistical or non-statistical sampling is a matter of the internal auditor’s professional judgment.When applying statistical sampling, sample size may be ascertained using either probability theory or professional judgment.
34Selection & Evaluation of Sample Selection of SampleIt should be selected in such a way that the sample can be expected to be representative of the population.Commonly used sampling methods are:Random selection and use of CAAT’sSystematic SelectionHaphazard SelectionEvaluation of Sample ResultsThe auditor should:Analyse the nature and cause of any errors detected in the sample.Project the errors found in the sample to the population.Reassess the sampling risk.Consider their possible effect on the particular internal audit objective.Evaluate the sample results to determine if the assessment of the relevant characteristics of the population is confirmed or not.
35DocumentationThe documentation includes:Relationship between the design of the sample and specific audit objectives.Assessment of the expected rate of error in the population to be tested.Assessment of the sampling risk and the tolerable errorAssessment of the nature and cause of errors.Rationale for using a particular sampling technique and results thereof.Analysis of the nature an cause of any errors detected in the sample.Projection of the errors found in the sample to the populationReassessment of sampling risk, where appropriateEffect of the sample results on the internal audit’s objective.
37Analytical Procedures Contents of the SIAIntroduction.Nature and Purpose.Analytical Procedures as Risk Assessment Procedures and in Planning the Internal Audit.Analytical Procedures as Substantive Procedures.Analytical Procedures in the Overall Review at the End of the Internal Audit.Extent of Reliance on Analytical ProceduresInvestigating Unusual Items or Trends.
38Introduction, Nature and Purpose To apply analytical procedures as the risk assessment procedures at the planning and overall review stages of the internal audit.Nature and PurposeAnalytical procedures include the consideration of comparisons of the entity's financial and non-financial information.In determining the extent to which the analytical procedures should be used, the following factors have to be consideredSignificance of the area being examined.Adequacy of the system of internal control.Availability and reliability of financial and non-financial information.Precision with which the results of analytical procedures can be predicted.Availability and comparability of information regarding the industry in which the organization operates.Extent to which other auditing procedures provide support for audit results.
39Analytical Procedures as Risk Assessment Procedures and as Substantive Procedures Analytical Procedures as Risk Assessment Procedures and in Planning the Internal Audit.To obtain an understanding of the business, the entity and its environment and in identifying areas of potential risk.Planning the internal audit for use both financial and non-financial informationAnalytical Procedures as Substantive ProceduresTo reduce detection risk relating to specific financial statement assertions and assertions relating to process.Inquire with the management as to the availability and reliability of information needed to apply analytical procedures.
40Analytical Procedures in the Overall Review at the End of audit, Extent of reliance and Investigating Unusual Items or TrendsAnalytical procedure should be applied at or near the end of the internal audit when forming an overall conclusion.Extent of Reliance on Analytical Procedures is based on the following factorsMateriality of the items involved.Internal audit procedures directed toward the same internal audit objectives.Accuracy with which the expected results of analytical procedures can be predicted.Assessments of inherent and control risks.Investigating Unusual Items or TrendsWhen analytical procedures identify significant fluctuations orWhen relationships that are inconsistent with other relevant information orData that deviate from predicted amounts.The internal auditor should investigate and obtain adequate explanations and appropriate corroborative evidence.
42Quality Assurance in Internal Audit IntroductionScope and ObjectiveIn House Internal AuditQuality Review
43Internal Audit Independent management function. Continuous and critical appraisal of the entitySuggest improvements and strengthen the overall governance mechanism of the entity.Provides assurance that there is transparency in reporting, as a part of good governance.
44Scope and Objective Applicable whenever an internal audit is carried. Whether by internal audit department or external firm of Professional accountants.Objective:To Establish standards and provide guidanceTo Ensure Compliance with professional standards, regulatory and legal requirements.To Improve functionalities of the organization, Transparency in reporting and good governance.
45In House Internal Audit Leadership responsibilities for quality in internal auditEthical requirementsAcceptance and continuance of client relationship and specific engagementHuman resourcesEngagement performanceMonitoring
46Quality Review Internal Quality Reviews Internal Quality Reviewer Communicating the results of Internal Quality ReviewsExternal Quality ReviewsExternal Quality ReviewerCommunicating the results of External Quality Reviews
48Terms of Internal Audit Engagement IntroductionElements of Terms of EngagementWithdrawal from Engagement
49IntroductionAgree on the terms of the engagement before commencement of Audit.The agreed terms would need to be recorded in an engagement letter.The responsibility of the internal auditor to prepare the engagement letter.To be signed both by the internal auditors as well as the auditee.Approval by Board of Directors/ Audit Committee.Periodic review and modification of Terms of Engagement.
50Elements of Terms of Engagement ScopeResponsibilityAuthorityConfidentialityLimitationsReportingCompensationCompliance with Standards
51Withdrawal from Engagement If unable to agree to any change in the terms or is not permitted to continue as per the original terms, then auditor should withdraw from the engagement.Consider whether there is an obligation, contractual or otherwise, to report the withdrawal to other parties.
53Communication with Management IntroductionMatters to be communicated.Communication ProcessDocumentation
54IntroductionProvides a framework for matters to be communicated with the management.Internal auditor should consider the following:Communicate clearly the responsibilities, scope and timing of Audit.Obtain relevant InformationProvide timely observationsPromote effective two way communication.
55Matters to be Communicated Planned scope and Timing of Internal AuditSignificant findings from the Internal AuditStages of Communication:Discussion DraftExit MeetingFormal DraftFinal Report
56Communication Process Establishing the communication ProcessForms of CommunicationTiming of CommunicationAdequacy of the Communication Process
57DocumentationIn case of Oral communication the internal auditor shall document, when and to whom they were communicated.In case of Written communication the auditor shall retain a copy of the communication as part of the internal audit documentation.
59Internal Audit Evidence Introduction and ObjectiveAudit EvidenceCategories of Documentary EvidenceModes of obtaining Audit Evidence
60Introduction and Objective Scope and coverage are much broader than Statutory Audit.Covers comments on internal control systems, risk management, propriety aspect of transactions.This Standard deals with the qualitative and quantitative aspects of evidence in internal audit.
61Audit EvidenceInternal audit evidence is persuasive rather than conclusive in natureThe internal auditor may obtain evidence on a selective basis by way of judgmental or statistical sampling proceduresThe internal auditor’s judgement is usually influenced by:The materiality of the item.The type of information available.Degree of risk of misstatement.
62Categories of Documentary Evidence: Documentary evidence originating from and held by third parties.Documentary evidence originating from third parties and held by the entity.Documentary evidence originating from the entity and held by third parties andDocumentary evidence originating from and held by entity.
63Modes of obtaining Audit Evidence InspectionObservationInquiry and confirmationComputationAnalytical review
65Consideration of Fraud in an Internal Audit IntroductionObjectives of Internal Control SystemElements of Internal Control SystemResponsibilities of Internal Auditor
66IntroductionFraud is defined as an intentional act by one or more individuals among management, those charged with governance, or third parties, involving the use of deception to obtain unjust or illegal advantage.The primary responsibility for prevention and detection of frauds rests with management and those charged with governance
67Objectives of Internal Control System Internal control refers to the process designed, implemented and maintained by the management of the entity to ensure accomplishment of its following objectives:Reliability of financial reporting.Efficiency and effectiveness in operations.Compliance with applicable laws and regulations.Safeguarding of assets.
68Elements of Internal Control System The control environment.Entity’s risk assessment process.Information system and communication.Control activities.Monitoring of controls.
69Responsibilities of Internal Auditor Control EnvironmentRisk AssessmentInformation system and communicationControl ActivitiesMonitoringCommunication of FraudDocumentation
71Internal Control Evaluation IntroductionFactors reflected in the Control EnvironmentInherent Limitations of Internal ControlsRole of Internal AuditorAreas to be Reviewed by Internal Auditor.Areas of EvaluationControls present in a System Driven EnvironmentTests of ControlCommunication of Internal Control WeaknessDisclosure
72IntroductionEstablish Standards and provide guidance on procedures to be followed by Internal AuditorCommunication of weakness in Internal control.Internal control system consists of interrelated components such as Risk assessment, Control (or Operating) environment, Monitoring, etc.
73Control Environment Factors reflected in the control Environment: Entity organization StructureFunctioning of BOD/ Governing Body.Management's philosophy and operating styleManagement's control system.Integrity and ethical valuesCommitment to competenceHuman resource policies and practices
74Inherent Limitations of Internal Controls Cost benefit AnalysisPotentiality for Human ErrorCircumvention of Internal controls by parties within/ outside the entity.Misuse of PowerManipulations by Management.
75Role of Internal Auditor Evaluation of the efficiency and effectiveness of controlsRecommending new controls where needed – or discontinuing unnecessary controlsUsing control frameworksDeveloping control self-assessment
76Areas of Review for Internal Auditor Mission, vision, ethical and organizational value-system of the entityPersonnel allocation, appraisal system, and development policiesAccounting and financial reporting policies and compliance with applicable legal and regulatory standardsObjective of measurement and key performance indicatorsDocumentation standardsRisk management structureOperational frameworkProcesses and procedures followedDegree of management supervisionInformation systems, communication channelsBusiness Continuity and Disaster Recovery Procedures
77Evaluation of Internal Control Verify mission statement and written goals and objectives.Assessing risks at the entity level.Assessing risks at the activity (or process) level.Prepare Business Control Worksheet.Ensure all risks to the entity are identified.Ascertain those risks for which no controls exist or existing controls are inadequate.
78System Driven Environment Determine whether the entity uses:Encryption tools, protocols to protect confidential or sensitive information.Back-up and restore features to reduce the risk of permanent loss of data.Virus protection software andPasswords that restrict user access to networks, data and applications.
79Tests of Control Performed to obtain effectiveness of the: Design of the internal control systems. Operation of the internal controls throughout the period.Cost Benefit analysis.Includes Inspection of Documents, Inquiries and Observation, Re-performance , Reconciliations and Testing of Internal Controls.
80Communication of Internal Control Weakness In case of continuing internal control weaknesses, consider whether:Management has increased supervision and monitoring;Additional or compensating controls have been instituted; and/orManagement accepts the risk inherent with the control weakness.
81DisclosureThe internal auditor in his report to the management, should provide:A description of the significant deficiency or material weakness in internal control.His opinion on the possible effect of such weakness on the entity’s control environment.
83Enterprise Risk Management IntroductionProcess of ERM and Internal AuditScopeMaturity of ERM structureDisclosure
84Introduction ERM enables management: To effectively deal with risk Associated uncertainty and enhancing the capacity to build value to the entityTypes of Risks:StrategicOperationalFinancial andKnowledge
85Process of ERMEnterprise Risk Management is a structured, consistent and continuous process of measuring or assessing risk and developing strategies to manage risk within the risk appetite.Process consists of Risk identification, prioritization and reporting, Risk mitigation, Risk monitoring and assurance.
86Scope of Internal Auditor’s Work Risk maturity levelCompliance with the risk management policyIn case of the risks covered by the internal audit plan:Assess the efficiency and effectiveness of the risk response.Assess whether the score of the residual risk is within the risk appetite
87Maturity of ERM Structure Protects the enterprise against surprisesStabilizes overall performance with less volatile earningsOperates within established risk appetiteProtects ability of the enterprise to attend to its core business andCreates a system to proactively manage risks.
88DisclosureAssurance rating (segregated into High, Medium or Low) as a result of the reviewTests conductedSamples covered andObservations and recommendations.
90INTERNAL AUDIT IN AN INFORMATION TECHNOLOGY ENVIRONMENT Matters to ConsiderPlanningNature of RisksReliability of ICSReview of IT Environment
91Matters to Consider The extent to which the IT environment is used The flow of authorised, correct and complete data to the processing centre.The processing, analysis and reporting tasks undertaken in the installation andThe impact of computer-based accounting system on the audit trail.
92Planning Information Technology Infrastructure Significance and complexity of computerised processingDetermination of the organisational structure.Determination of the availability of data
93Nature of Risks Lack of transaction trails Uniform processing of transactionsLack of segregation of functionsPotential for errors and irregularitiesInitiation or execution of transactionsDependence of other controls over computer processingPotential for increased management supervisionPotential for the use of CAAT.
94Reliability of ICSAuthorised, correct and complete data is made available for processing.Timely detection and correction of errorsInterruption in the working of the IT environment .Accuracy and completeness of output.Adequate data securityUnauthorised amendments to the programsSafe custody of source code of application software and data files.
95Review of IT Environment System Audit reportsReports of system breachesReports of network failures/ virus attacks and threats to perimeter security.General controlsApplication controlsBusiness Continuity Planning, Crisis Management, Disaster Recovery Procedures.
97KNOWLEDGE OF THE ENTITY AND ITS ENVIRONMENT IntroductionAcquiring Knowledge of the EntitySource of InformationUsing the Knowledge
98Introduction What constitutes the knowledge of an entity’s business. Importance to the various phases of an internal audit engagement .Techniques to be adopted in acquiring such knowledge.Identify appropriate, reliable and useful information
99Acquiring Knowledge of the Entity Relevant industry, regulatory, and other external factors.Nature of the entity and its Business operations.Investment, Financing activities and Financial reporting.Accounting policies, Business risk, objectives and strategies of the entity.
100Source of Information Previous engagement experience Business plan/organisational structure and Internal documentation produced by the entity.Incorporation documents and Visits to the entity premises.Discussion with key management persons, statutory auditors, Suppliers, customers and third party agencies.Publications related to the industry.
101Using the Knowledge Assessing risks and identifying key focus areas. Planning and performing the internal audit effectively and efficiently.Evaluating audit evidence.Providing better quality of service to the clientThe information obtained should be adequately documented.
103USING THE WORK OF AN EXPERT IntroductionNeed to use work of ExpertSkills and Competence of ExpertEvaluating the work of an ExpertDisclosure
104IntroductionAn expert is a person, firm or other association of persons possessing special skill, expertise, knowledge and experience in a particular field.Use expert if internal Audit Team does not possess the required knowledge.If Expert is engaged by the senior management or those charged with governance.
105Need to use work of Expert Factors to be Considered:Materiality of the item being examined.Nature and complexity of the transaction.Risk of error.Extent of Internal audit evidence available.
106Skills and Competence of Expert The expert’s professional qualifications or membership in an appropriate professional body. The reputation of the expert in the relevant discipline.The knowledge and specific experience of the expert in the industry to which the auditee entity operates.
107Evaluating the work of an Expert The objectives and scope of the workAccess to records, personnel and physical properties.The ownership and custody of engagement documentation and working papers.Confidentiality of the expert's workExpert’s relationship with the auditeeConfidentiality of the auditee’s information used by the expert.Verify the source data used, assumptions made and methods used in obtaining the result.
108Disclosure Normally work of an expert is not required to be disclosed. Disclose the work if it is beneficial to the reader after obtaining Prior consent of Expert.Outline the assumptions, broad methodology and conclusions of the expert.
110Consideration of Laws and Regulations in an Internal Audit Scope and Objective.Responsibility of ManagementResponsibility of Internal AuditorTypes of Laws and RegulationsCompliance with Laws and Regulations.Audit procedures in case of Non Compliance identified.Reporting of non compliance
111ScopeTo consider laws and regulations when performing an internal audit.To test and report on compliance with specific laws or regulations.Non compliance- Acts of omission or commission by the entity, either intentional or unintentional, which are contrary to the prevailing laws or regulations.Non-compliance does not include personal misconduct by those charged with governance, management or employees of the entity.
112Objective To obtain sufficient appropriate audit evidence To perform specified audit proceduresTo respond appropriately to non-compliance or suspected non-compliance
113Responsibility of Management To ensure compliance with the provisions of laws and regulationsThis can be achieved by assigning appropriate responsibilities to the following: A compliance committeeA audit committee.
114Responsibility of Internal Auditor Should not assume any accountability for risk management decisions taken by the management.Inherent limitations on the internal auditor’s ability to detect non-compliance:To many laws and regulationsNon-compliance may involve conduct designed to conceal itLegal determination by a court of law.
115Types of Laws and Regulations Laws and regulations having direct effect on Financial Statements:Obtain sufficient appropriate audit evidence to ensure compliance.Laws and regulations having no direct effect on Financial Statements:Undertake specified audit procedures to identify non-compliance.May have a significant impact on the functioning of the entity.
116Compliance with Laws and Regulations. Obtaining an Understanding of the Legal and Regulatory FrameworkLaws and Regulations having Direct Effect on Financials.Procedures to Identify Instances of Non-Compliance.Non-Compliance brought to the Internal Auditor’s Attention through Other Audit ProceduresWritten RepresentationsInternal Audit Procedures When Non-Compliance is Not Identified orSuspected
117Internal Audit Procedures When Non Compliance is Identified Indications of Non-Compliance with Laws and RegulationsMatters Relevant to the Internal Auditor’s EvaluationEvaluating the Implications of Non-Compliance
118Reporting of non compliance Reporting Non-Compliance to those Charged with GovernanceReporting Non-Compliance in the Internal Auditor’s ReportIf precluded from obtaining sufficient appropriate audit evidence then Report the same.If unable to determine whether non-compliance is due to limitations imposed by the circumstances / management then evaluate the observations and findings in accordance with SIA 4.